Cyprus businesses hurt as banks stay shut

Cypriot businesses were under increasing strain to keep running yesterday after financial authorities stretched the country’s bank closure into a second week in a harried attempt to stop depositors rushing to drain their accounts.

Cyprus’s central bank governor, Panicos Demetriades, said “superhuman efforts are being made” to open banks tomorrow.

“Temporary” restrictions will be imposed on financial transactions once the banks do, he said, but he would not specify what they would be or how long they would be in place for.

“We have to restore the public’s trust in banks,” he said.

Finance Minister Michalis Sarris said the restrictions would help stem any mass deposit withdrawal that is “bound to happen” and that they would be removed in a “relatively short period of time.”

“I think every day (banks) are not open creates more uncertainty and more difficulties for people, so we would like to do our utmost to make sure that this new goal that we have set will work,” he said.

All but two of the country’s largest lenders had been due to reopen today, after being shut since March 16 to stop savers from withdrawing all their money from the banks while politicians figured out how to raise the funds necessary for Cyprus to qualify for an international bailout.

However, the central bank made a surprise reversal just before midnight, announcing all banks would remain closed until tomorrow while it and the lenders work on capital controls to limit the amount of money that can be withdrawn.

“We have to all understand that we live in very critical times; officials of the government and the central bank are working day and night,” Demetriades said.

Under the deal for a $12.9 billion rescue clinched in Brussels early Monday, Cyprus agreed to slash its oversized banking sector and inflict hefty losses on large depositors in troubled banks. Sarris said authorities hope to limit job losses to a “small number.”

“We are looking to a much smaller banking system over time and more concentrated on its core business which is Cyprus and the international business units in Cyprus,” he said.